Division 296: From 2023 Announcement to March 2026 Passage — Every Design Change Explained
Last reviewed:
Primary tax-year context: Current Australian tax settings
This article is general information only. We maintain pages using primary-source checks and date-based reviews. See editorial policy.
General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.
Division 296 — the additional super tax on high-balance members — changed shape multiple times between its March 2023 announcement and final Senate passage on 10 March 2026. If you tried to plan around one of the intermediate designs, the final law is likely different from what you were preparing for. This article tracks every material change and explains what is actually in force.
Timeline at a glance
| Stage | Date | Design |
|---|---|---|
| Original announcement | March 2023 | Single $3M threshold, +15% on notional (unrealised) earnings, start 1 July 2025 |
| Draft bill — exposure | Late 2025 | Single $3M threshold, unrealised earnings, start 1 July 2026 |
| Bill — introduced to Parliament | 11 February 2026 | $2M / $5M dual thresholds, realised earnings, start 1 July 2027, grandfathering of pre-July-2025 gains |
| Bill — passed Senate | 10 March 2026 | $3M / $10M dual thresholds, realised earnings, start 1 July 2026, grandfathering retained |
| Implementation begins | 1 July 2026 | First TSB test 30 June 2026; first assessment 2026-27 |
The February 2026 bill as introduced to Parliament was substantially rewritten during Senate debate before passage. The most eye-catching Senate amendments reverted the thresholds from $2M / $5M back to $3M / $10M and advanced the start date from 1 July 2027 back to 1 July 2026.
The four material design changes
1. Thresholds: dual-tier structure
What was originally proposed: A single $3 million threshold with a flat +15% Div 296 rate.
What was briefly proposed (February bill): A $2 million lower threshold and $5 million upper threshold — aimed at raising more revenue and reaching a broader base.
What passed: Two tiers at $3 million and $10 million. The $3M–$10M tranche attracts +15% Div 296; above $10M attracts +25%. Combined with the base 15% super tax, total rates are 30% and 40% respectively. Both thresholds are CPI-indexed in $150,000 and $500,000 steps — unlike the static 2023 announcement.
2. Earnings methodology: unrealised → realised
What was originally proposed: Tax notional earnings computed from the balance formula: closing TSB − opening TSB + withdrawals − contributions. This captured unrealised capital gains because it relied on balance changes rather than actual income events.
What passed: Only realised earnings count — dividends, interest, rent, and realised capital gains net of realised losses. Unrealised gains on property, unlisted shares, and other assets are excluded until disposal. This was the most substantive amendment to the original design and addresses the biggest industry objection (paper-gain tax with no cash flow to pay it).
3. Grandfathering: pre-July-2025 gains excluded
What was originally proposed: No explicit grandfathering — all earnings from the start date onward would count, including gains on assets held long before the tax was introduced.
What passed: Capital gains accrued before 1 July 2025 are grandfathered out. Only the post-1-July-2025 portion of a gain counts when realised. This protects pre-existing asset positions in SMSFs (especially long-held property and unlisted holdings) from paying Div 296 on appreciation that happened entirely before the tax existed.
4. Start date: 1 July 2027 → 1 July 2026
What was proposed in the February bill: A one-year delay from the exposure draft’s 1 July 2026 to 1 July 2027, giving affected members an additional year to plan.
What passed: Start date moved back to 1 July 2026. The delay was removed during Senate negotiation. The first TSB test is at 30 June 2026, and first assessments are issued in the 2026-27 financial year.
The transitional rule for 2026-27 is that the reference TSB is the closing balance at 30 June 2027 (not the higher of opening and closing), reducing the first-year administrative complexity.
What did NOT change
- 40% top estate / marginal rate. Base tax rates on super remain unchanged. Div 296 is an additional rate on the same assessable earnings.
- Spouse splitting and co-contributions. Existing super concessions for lower-income spouses and government co-contributions remain.
- Transfer balance cap. The $1.9M pension-phase cap is separate and unaffected by Div 296.
- Defined benefit special rules. The commensurate methodology for defined benefit interests was part of the proposal throughout and remained in the final Act.
What this means for planning
If you were planning around any of the intermediate designs, validate against the final law:
- If you bought property expecting a $2M or $5M threshold — the thresholds moved higher and indexation applies, so your exposure is generally lower than the February bill suggested.
- If you accelerated contributions expecting 1 July 2027 start — the start moved back to 1 July 2026, so your first year of exposure is earlier than the February timeline.
- If you deferred rebalancing because of the unrealised-earnings worry — that worry is resolved; realised earnings only, so internal rebalancing that avoids realisation doesn’t directly trigger Div 296.
- If you have long-held assets with large embedded gains — the pre-1-July-2025 grandfathering protects a meaningful portion of historic appreciation. Cost-base and acquisition-date documentation for fund assets matters for the first assessment.
The calculator
Our Division 296 calculator models the final passed law: dual tiers at $3M and $10M, realised earnings input (no balance-diff model), and marginal-rate comparison. Select the 2026-27 or 2027-28 tax year to see the passed-law outcome, or select 2025-26 / 2024-25 to confirm Div 296 does not apply in those years.
What to monitor next
- ATO implementation guidance — rulings on the realised-earnings methodology, commensurate methodology for defined benefit interests, and the mechanics of grandfathered capital gain carve-outs.
- Threshold indexation — the first CPI-triggered step could raise the $3M threshold during 2027-28 or 2028-29 depending on CPI readings.
- Administrative refinements — any further amendments in Treasury Laws Amendment bills over 2026-27 and 2027-28 could adjust the fine print without changing the headline design.